|Footnotes for this article are available at the end of this page.
The Department of Justice Antitrust Division (DOJ) has recently announced two indictments alleging criminal antitrust violations against employers involving wage negotiation and no-poach theories. The cases, which according to the DOJ, constitute per se violations of the Section 1 of the Sherman Act, involve allegations related to employee hiring and compensation decisions. They indicate an evolution of what the Government believes constitutes criminal anticompetitive conduct and illustrate a focus on the healthcare industry. Under the new Biden Administration, investigations related to this type of conduct will likely increase.
In United States v. Neeraj Jindal (No. 4:20-cr-00358 (E.D. Tex. Dec. 9, 2020), the defendant owned a therapist staffing company. The indictment alleges that, in violation of Section 1 of the Sherman Act, the defendant agreed with his co-conspirators to fix lower pay rates for physical therapists and physical therapy assistants. The defendant was also indicted for obstruction for filing false statements and withholding information from the Federal Trade Commission (FTC) during the course of its investigation. It is not unusual for the FTC to refer a potential criminal matter over to the DOJ since the FTC does not have criminal authority. That said, this is the DOJ’s first criminal case involving allegations of illegal wage negotiation or suppression.
In United States v. Surgical Care Affiliates, LLC and Scan Holdings LLC (No. 3-21-CR00011-L (N.D. Tex. Jan. 5, 2021), the defendants were indicted under the “no-poach” theory for violating Section 1 of the Sherman Act. They are alleged to have illegally agreed not to solicit each other’s senior-level employees. The defendants, competitors which owned outpatient medical care facilities, allegedly were engaged in a seven-year conspiracy. The two-count indictment also alleged that the defendants conspired to allocate employees.
These indictments are the first by the DOJ under these theories but are consistent with the previous policy announced by the DOJ/FTC. In October 2016, the Antitrust Division of the DOJ and the FTC issued an eleven-page joint guidance document entitled “Antitrust Guidance for Human Resource Professionals” (the Guidance).1 Directed at human resource professionals, the Guidance reaffirmed the two antitrust agencies’ stance that the antitrust laws apply with equal force to firms that compete to recruit and retain the same employees, irrespective of whether those firms compete in the same product or service market. In pertinent part, the Guidance asserts that “naked” agreements (i.e., facially anti-competitive agreements that lack pro-competitive justifications) between competitors in an employment market to fix wages or to not poach employees from one another constitute per se violations of the antitrust laws. Importantly, in a significant policy shift, DOJ announced, at that time, its intention to prosecute such per se violations criminally.
The Guidance highlights two types of anticompetitive agreements that, without any pro-competitive justification, likely give rise to a per se violation of the antitrust laws:
- “Wage-Fixing” Agreements – Agreements pertaining to employee salary or other terms of compensation.
- “No Poaching” Agreements – Agreements to refuse to solicit or hire another company’s employees.2
The Guidance makes clear that “naked wage-fixing or no-poaching agreements among employers, whether entered into directly or through a third-party intermediary, are per se illegal under the antitrust laws.”3 Importantly, DOJ indicated it only intended to prosecute “naked” wage-fixing or no-poaching agreements, meaning that “the agreement is separate from or not reasonably necessary to a larger legitimate collaboration between the employers,” and that, therefore, the agreement will be “deemed illegal without any inquiry into its competitive effects.”4
These recent indictments should put employers on notice as to this area of government scrutiny and to be careful in engaging in any communications with other companies about employee compensation or hiring. The below list indicates potential areas that can lead to either criminal or civil investigations from the antitrust authorities:
- Agreeing with another company about employee salaries, benefits, other terms of compensation, or terms of employment;
- Agreeing with another company to refuse to solicit or hire that company’s employees, or expressing to competitors that neither company should compete too aggressively for the other’s employees;
- Exchanging company-specific information about employee compensation or terms of employment with another company;
- Participating in a meeting, such as a trade association meeting, where any of the above topics are discussed, or discussing the above topics with colleagues at other companies (even during social events or in other non-professional settings);
- Receiving documents that contain another company’s internal data about employee compensation.5
Jeffrey S. Jacobovitz is a former Federal Trade Commission attorney and has extensive experience in criminal antitrust investigations and cases. He is currently the Vice-Chair of the ABA Antitrust Section’s Compliance and Ethics Committee and former chair of the ABA’s White Collar Crime Committee’s Criminal Antitrust Section. If you have any questions on these indictments or DOJ/FTC policy, please contact Jeffrey, chair of AGG’s Antitrust Group, at 202-677-4056.
 Department of Justice, “Antitrust Guidance for Human Resource Professionals,” (Oct. 2016) [hereinafter, “Guidance”], available at https://www.justice.gov/atr/file/903511/download.
 Guidance, supra n.1, at 3.